WASHINGTON ― The federal government cannot guarantee that President Donald Trump will not fire a Consumer Financial Protection Bureau official who is suing the president over his purported appointment of a former Republican congressman to a position she says is rightfully hers, a Justice Department official told a federal judge Monday evening.
Attorneys representing two people who both believe they have the rightful claim to be acting head of the CFBP squared off at a hastily arranged hearing in federal court here. The hearing capped off what had been a frantic day at the CFPB, which has come under attack from Republicans who believe the agency has too much power.
The 2010 Dodd-Frank law that created the CFPB established a clear, if unusual, succession process. When a CFPB director resigns, according to the law, the agency’s deputy director immediately becomes its acting chief, serving out the remainder of the director’s term, unless the president appoints a new director who is confirmed by the senate.
When CFPB Director Richard Cordray stepped down last week, he tapped recently appointed Deputy Director Leandra English to take over his job until July. But the Trump administration decided not to wait that long and instead appointed Office of Management and Budget Director Mick Mulvaney to the job and told him to show up at the CFPB on Monday.
English, represented by attorney Deepak Gupta, filed suit Sunday night. Gupta told Judge Timothy J. Kelly, a recent Trump appointee, at the hearing Monday that he should maintain the status quo that was in place before Mulvaney showed up at the CFPB with doughnuts a few hours earlier. Letting Mulvaney take charge, Gupta argued, would “reward” bad behavior because the change took place after the lawsuit was filed. Gupta also squeezed in a reference to the late Supreme Court Justice Antonin Scalia, telling Kelly that the text of the statute should be clear.
“There needs to be an answer to this question. There needs to be one soon,” Gupta said, predicting whatever decision the judge made would quickly be appealed to the U.S. Court of Appeals for the District of Columbia Circuit. “Everyone needs to know who is the director of this bureau.”
Kelly seemed cautious about the idea of issuing a preliminary injunction that would order the president to refrain from appointing someone, calling the idea of enjoining the president an “extraordinary remedy.” He made no immediate ruling Monday and said he planned to read an additional brief the government planned to file Monday night.
Brett Shumate, a political appointee at the Justice Department, told Kelly that he was unaware of any plans to fire English. “I have no knowledge of that, your honor,” he said. But he later clarified that he could not guarantee that English would not be fired and added that the government did not believe that loss of position would be an “irreparable harm” that would necessitate an injunction. Shumate said English is still showing up at the office and getting a paycheck. But the “status quo” now, he said, is that Mulvaney is the acting director of the CFPB.
“They’re treating him as the director,” Shumate said of CFPB employees. Putting English in charge would cause the president to suffer damage and would create widespread confusion within the agency, he said.
Congress established the CFPB to combat consumer lending abuses after the subprime mortgage debacle led to millions of foreclosures and fueled the 2008 financial crisis. The agency has returned more than $12 billion in ill-gotten gains from banks to consumers since taking up its task. It most recently was involved in imposing a $100 million fine against Wells Fargo for illegally creating fake bank accounts. The CFPB has authority to rein in abusive practices across a broad spectrum of consumer credit, including student loans, payday loans, mortgages, credit cards and checking accounts.
Mulvaney is ideologically opposed to the agency’s existence, having called the CFPB “the worst kind of government entity” and a “sad, sick joke” in congressional testimony. The president appeared to share Mulvaney’s sentiments in a tweet over the weekend.
“The Consumer Financial Protection Bureau, or CFPB, has been a total disaster as run by the previous Administrations pick. Financial Institutions have been devastated and unable to properly serve the public. We will bring it back to life!”
Banking, despite the president’s claims, remains wildly profitable. In just the third quarter of this year alone, Wells Fargo posted a $4.6 billion profit, while Bank of America made $5.6 billion and JPMorgan Chase took home $6.7 billion.
Top Democrats, including Senate Minority Leader Chuck Schumer (D-N.Y.) and Sen. Elizabeth Warren (D-Mass.), who came up with the idea for the CFPB after the financial crisis, have supported English as the acting director. Few doubt that Trump will eventually be able to appoint someone who does not support the agency’s mission as its top official. If English remains in office, her term will expire in July.
But installing Mulvaney as acting director could lengthen the duration of Trump’s influence over the agency. Opponents of the CFPB don’t need the agency to actually function to win a political victory ― the whole point is to stymie its work and prevent it from interfering with bank business. If Mulvaney is able to effectively block the agency’s work, Trump would have no urgent need to appoint a permanent director. And the longer he waits to appoint one, the later the expiration date for the next director’s five-year term.
This article has been updated to clarify language surrounding the succession process.